Cognitive Bias No: 2 - ANCHORING BIAS

No: 2 - Anchoring Bias:?

The tendency to allow the first piece of data we are given to set the baseline for the entire discussion.

Example: Beginning a discussion around a software change with the fact that the software has millions of live users/customers, may cause the team to be overly cautious, even if the change is actually invisible to users.

How the bias might show up: "Welcome everyone ! Did anyone watch the Sixers game last night". Later, "We should start our bid at Six hundred thousand"...

Cognitive psychologists have shown that, in negotiations involving money, the first offer tends to establish the range of expectations for both parties. A higher number will tend to create higher expectations; a lower number will tend to create lower expectations. The first number?anchors?the discussion in both parties’ minds. Skillful negotiators can use this to their advantage, using anchoring to shape everything from union negotiations to pricing agreements with suppliers.

But anchoring can also distort business decisions in less obvious ways.

For example, two groups of German judges were asked to roll a pair of loaded dice before reviewing a hypothetical criminal case and deciding on the sentence. One group was given dice that always rolled a three, while the other group was given dice that always came up nine. The average sentence of the group that rolled nines was 50 percent higher than the average sentence of the group that rolled threes. Those judges’ decisions were affected by a number that had absolutely nothing to do with the case they were considering –?or any case, for that matter. Random numbers can skew business decisions in a similar way if we are not careful.?

Red Team Thinking?helps mitigate the anchoring bias by making sure relevant numbers are reviewed objectively

Watch-out for next upcoming posts:

No: 3 - Automation Bias;

No: 4 - Availability Heuristic